AI and the White-Collar Devolution
AI and the White-Collar Devolution
President Ronald Reagan, the greatest hero for the working class in America, turned out to be its greatest adversary. Unchecked immigration (legal and illegal) depressed wages at home, and rigid free trade policies exported jobs abroad. The result was unemployment and a permanent shift in the American economy. Technology was an accelerant, and we now know the rest of the story.
Learn to Code!
This slogan was championed a decade ago. Yes, jobs were being lost, but that was ‘normal.’ Learn to code! Perhaps factories will stay in China. But learn to code! Do not be angry at the world, as change is inevitable. Learn to code!
On paper, it sounded good. And from a classist perspective, it represented a new Marie Antoinette-ish feeling in the intelligentsia. After all, couldn’t ‘they’ just learn to code?
Enter ChatGPT. Or ChatGPT-4. Or whatever version we are reaching now. Learning to code doesn’t seem so attractive or valuable anymore. Chat GPT will just code for you.
After the political turmoil and populism of the last several years, it became en vogue to obsess over the blue-collar rebellion and revolution. But now we are entering the white-collar devolution, and there is no answer. There is no turning back, either. And the change will be total. There will need to be a clear re-positioning of value towards entrepreneurial independence, imaginative creation, and an understanding of the modern marketplace.
Blue Collar Blues
“The way certain developments in the economy, in politics, and in the social world have gone in the last 40 years has led to working-class white men … feeling like their authority has been undermined. When you get strong feelings of anger and despair in a group or a population, that can turn very quickly into giving encouragement to the politics of resentment or the politics of revenge.”
It has become common parlance by economists to acknowledge the blue-collar displacement that began in earnest in the 1980s. It was not always the case. For years, and before the political turmoil and populism of the late 2010s, the economic story of the West and the so-called rules-based order was seen as an unbridled success. Yet, the numbers told a different story for an entire segment of the population, with millions left behind.
The decline in manufacturing has been global but most acute in the West. The chart shows that the share in nearly every advanced economy of manufacturing value in GDP has declined precipitously. From a 1979 peak of 19.4 million manufacturing jobs in the US, today that number hovers around 12 million, despite an expanded economy and a population that increased by 100 million. It affects not just direct jobs but also indirect jobs linked to manufacturing and even entire communities.
This has been part of a broader story of the shrinking middle class across OECD countries. Yet, the manufacturing story has also revealed that output has increased simultaneously. Many jobs lost are not coming back because they are not needed. So what was to be done?
Displacement for Thee but not for Me
Starting in 2011 and then dramatically coordinated in 2012, a global movement emerged to announce that everyone should learn to code. CNN was in on the act with a lead opinion (when people still watched CNN). Code Academy was launched, and New York’s Mayor Bloomberg signed up. Code.org was soon founded and backed by tech luminaries the world over. Even President Obama got in on the act.
It made sense. The world was changing. Technology was creating a digitized world. And the West’s new blue-collar workforce would build computer programs, not cars. Set aside the fact that Indian coders would outnumber, outskill and outcompete (on price) whatever Western cohort to code would emerge. If you weren’t coding, what were you going to do?
The world is constantly changing. Fast. Reaganomics shocked the economic consensus Henry Ford and FDR laid down. But that cycle has largely played itself out. Manufacturing employment is stabilizing, especially with the onset of friendshoring. Physical work is becoming more lucrative again. Skilled trades are seeing income increases, with plumbers routinely making six-figure salaries.
A new cycle is underway, and it will be even more visceral. Since 1970 the percentage of college graduates has tripled in the United States, reaching 95 million. Approximately 50-60 million have a bachelor’s degree. Remember that the civilian labor force is just over 160 million (similar numbers in Europe). The white-collar workforce (big tent definition) is around 90 million. The change coming for the white-collar workforce dwarfs the blue-collar workforce simply by the numbers.
The White-Collar Devolution
A structural economic shift in corporate America is already underway. Revenue at leading companies has reached $2 million per employee. This is a result of corporate centralization. Yet, digital decentralization is pushing that further. Look at WhatsApp. When they exited to Facebook, they had over a billion users with just 55 employees. How many employees are even needed?
AI shifts the adage from delegate to automate, opening the door to even more job losses. Why delegate to an employee when you can automate via AI? ChatGPT, developed by OpenAI, did not immediately revolutionize what is available through AI. Microsoft, IBM, Amazon, Google, and others have been investing heavily in AI for the last decade and have advanced the technology very far. Yet, Chat GPT layered a UI/UX on it and familiarity that has blown the field wide open. Like the iPhone, it has the potential to change how society and the economy interact with and use AI.
Prior thinking was that ‘knowledge’ jobs and ‘creative’ industries would be safe. AI will first wipe out knowledge assembly line production, like writers, social media managers, graphic designers, and coders. It will then take out low-level accountants, lawyers, and pharmacists. It will move up the value chain to decimate the entire entertainment sector, financial services and advisory, and all manner of middle management. The impact will be ballistic and brutal. OpenAI has a list (see below).
People do not fully grasp how close we are to this (d)evolution. The entire workforce development and preparation industrial complex, which in the United States reaches $2 trillion in annual spend, is antiquated and soon to be redundant, if it is not already. Companies are operating on principles that are already past due. Employees need to retool beyond ‘learn to code.’
Rules of the Future Road
A clear re-positioning of value is required. Entrepreneurial independence will be key as economic structures become less bloated and nimbler and the labor model from the 1920s fully reverses. Finding smaller ‘shops’ and creating your own storefronts will be essential, not a luxury. Looking back at bygone eras 500 years ago, was a blacksmith or a cobbler a giant of an entrepreneur or represented just a way of life and work? The idea that every enterprise must grow into a messiah complex or a unicorn will go by the wayside. Yet, understanding how to operate a micro-enterprise or be part of one will be crucial. [By the way, there will still be big winners].
A second focus is imaginative creation. ‘Superpowers’ will be at everyone’s fingertips, much like the smartphone. AI will be able to ‘create’ on your behalf. How do you understand what your customers want (not just need)? How do you develop something that can emotionally resonate? How can you bring together multiple strands of AI and interfaces? Can you bridge the physical and virtual worlds? These AI ‘directors’ will stand out. The best will be giants, but they will be few and far between. Everyone will need to have this skill.
Finally, an understanding of the modern marketplace is critical. How do you transact? Can you navigate the perilous nature of shifting tides in a volatile global political economy? Where do you obtain financing from?
Overall, there can be incremental preparation. Integrating AI daily into your processes, building your knowledge stack, and setting up your independence – as an individual or institution. The challenge of a fast-changing world is that you cannot live in the future, even if it is near. You must operate in the transition, ready for what is to come but staying steady in the present.
From a government perspective, an inevitable economic restructuring is underway that is irreversible and massive. Tens of millions of workers who previously thought they were at the top of the economic food chain will be wiped out. Free money will bridge this problem by creating corporate welfare, but that has an inevitable expiry date. Governments, individuals, and institutions who rely on short-termism will be caught unaware.
Most big changes happen gradually and then suddenly.
Prepare today or be left behind tomorrow.
[This post was written by ChatGPT…or was it?]